The first milestone for entrepreneurs who want to a business loan is called ‘Seed Capital’ or ‘Seed funding’. It refers to the initial investment raised by the founders from their family and friends who would use savings and personal assets. It is common to see most entrepreneurs do not have enough capital to launch their companies and look for other ways to raise money.
To get a project funded, there are a number of things investors and funders look for in the concept such as traction and validation of the business. Develop an insightful business plan and use seed capital to do full research and marketing of your idea, then you should be ready for the next round of funding. Use our business plan template as a guideline (as if an investor is asking you questions). By validating your business against the business plan guideline will help you answer some thought provoking questions from an investor standpoint.
The best way to pitch your concept to investors is by providing the following information in your business plan.
- Proof of Concept (need to prove that is a market for it + monetization methods)
- Get your first customers
- Obtain feedback
- Risk Assess (test the market look for changes and improve)
Many start ups want structured funding. Structured finance is a broad term used to describe a sector of finance that was created to help transfer risk using complex legal and corporate entities. This transfer of risk is applied to the security of various financial assets such as (but not limited to); mortgages and credit card borrowing. This helped provide increased liquidity for funding sources to markets like housing and to transfer risk to buyers of structured products. It permits financial organisations to remove certain assets from their balance sheets as well as provide ways for investors to access diversified asset classes.
Large Business Loan Sources
Knowing and understanding the differences between getting a bank loan and utilizing alternative finance sources for your project can be very important to the amount of money you save. The infographic shows the different sources of funding and describes how start up finance works. There are many project funding options you can go with the get the right funding for your project.
Startup Business Loan
Some projects that need 100% project funding might need further help from a lender. To help get projects funded, some funders might choose to back projects by utilising a number of bank instruments. Although there will be an initial cost to get these instruments, the costs could potentially be refunded at a later date. The lender will decide whether the project is suited for this type of finance.
Utilizing Debt Instruments
“A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Types of debt instruments include notes, bonds, certificates, mortgages, leases or other agreements between a lender and a borrower”. – Investopedia.com
- Bank Guarantee
A bank guarantee is a type of guarantee document. A bank or other lending organization promises to repay the liabilities of a borrower in the event that the debtor is unable to do so.
- Sovereign Guarantee
A Sovereign Guarantee is a guarantee backed by the Government. In other words, it’s a Government’s guarantee that an obligation will be satisfied if the primary borrower defaults.
Monetizing Debt Instruments
Monetizing debt instruments is very common in the financial world. If a Government is $1 Trillion in debt, it can expand the money supply to $1 Trillion and reduce the national debt to zero. It is not uncommon for Governments to monetize their debts like this but in doing so, increases the amount of money in circulation. Project funders can monetise instruments against your project to help manage financial risk to the lender.
Prestige Capital Partners can monetise bank guarantees if the issuing bank is within the top 10 world banks and located in US, UK and Europe.